On June 23, 2022, Bill C-19, also known as the Budget Implementation Act, 2022, No.1 (the "BIA"), received royal assent. As discussed in our previous blog post, the BIA includes significant amendments to the Competition Act (the "Act"), including with respect to abuse of dominance, which came into force in June 2022. On October 25, 2023, the Competition Bureau (the "Bureau") released a draft bulletin discussing its approach to the June 2022 abuse of dominance amendments (the "Draft Bulletin"). This blog post summarizes this new guidance.
By way of background, abuse of dominance under section 79 of the Act occurs when (i) a dominant firm or a dominant group of firms (ii) engages in a practice of anti-competitive acts, (iii) with the result that competition has been, is, or is likely to be prevented or lessened substantially in a market. Section 78 of the Act sets out a non-exhaustive list of examples of anti-competitive acts. Applications under the abuse of dominance provisions are heard only by the Competition Tribunal (the "Tribunal"). Where all three requirements of section 79 are met, the Tribunal may prohibit the anti-competitive conduct and may also direct the dominant firm to pay an administrative monetary penalty ("AMP") or to take any action that is reasonable and necessary to overcome the anti-competitive effects of the conduct.
The BIA contains a number of amendments to the abuse of dominance provisions, including: (i) introducing a definition of "anti-competitive" act; (ii) expanding the list of anti-competitive acts under section 78; (iii) clarifying the factors that will be considered when assessing competitive effects; (iv) creating private rights of access to the Tribunal for abuse of dominance; and (v) increasing the potential AMPs available for a contravention of the abuse of dominance provisions.
Definition of Anti-Competitive Act
The BIA defined the term "anti-competitive act" to mean "any act intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition". Notably, jurisprudence arising from the abuse of dominance provisions historically held that an "anticompetitive act" is one that is intended to have a predatory, exclusionary or disciplinary negative effect on a competitor in a relevant market. As such, the amendments codified this previously accepted definition, and also closed an alleged "loophole" in which dominant firms could escape scrutiny when their conduct softens competition but does not have a negative effect on a competitor.
The Draft Bulletin notes that, in general, the Bureau will continue to apply its existing analysis to identify anti-competitive acts, including considering subjective evidence of intent, the reasonably foreseeable consequences of the conduct, and any pro-competitive or efficiency-enhancing justifications for the conduct.
With respect to the newly introduced section of the definition (an act intended to have "an adverse effect on competition"), the Draft Bulletin notes that this should be considered to capture "any form of conduct that has the purpose of negatively affecting the competitive process", such as "conduct that softens competition, benefitting one or more competitors", conduct that reduces firms abilities or incentives to compete, or conduct that makes conscious parallelism "more likely or effective" or otherwise facilitates coordination. By way of example, the Draft Bulletin notes that this may include:
- agreements between competitors (such as licensing agreements or joint venture agreements);
- sharing competitively sensitive information (which can include a single firm unilaterally choosing to disclose information, firms sharing competitively sensitive information in a reciprocal manner, competitively sensitive information being shared through intermediaries such as trade associations, joint ventures or pricing algorithm developers, or the use of meet-or-release clauses that result in mutual knowledge of pricing decisions);
- contracts that reference or depend on rivals (that is, where a contract contains terms that relate to a different commercial relationship involving at least one of the two contracting parties, such as MFN clauses, price parity clauses, non-discrimination clauses or meet-or-release clauses); or
- serial acquisitions.
Notably, this means that where an agreement was previously reviewable only under section 90.1 of the Act (the civil competitor collaboration agreements provisions), the Bureau may in some cases now choose to pursue this agreement under section 79, which provides for more significant remedies, including potentially very large AMPs. Additionally, in the context of a series of mergers (each of which may not on its own be considered problematic under the merger review provisions of the Act), the Bureau may choose to review under the abuse of dominance provisions. The Draft Bulletin also notes that, in some cases, the Bureau may review conduct under multiple provisions of the Act simultaneously.
Finally, the Draft Bulletin states that conduct intended to harm competition may be particularly relevant in situations where several firms are jointly dominant. In this regard, the Draft Bulletin notes that joint conduct may engage the abuse of dominance provisions regardless of whether there is coordination between the jointly dominant firms. In particular, it is not necessary for there to be any agreement between firms relating to the conduct, although such an agreement may be relevant to our analysis. For example, the Draft Bulletin notes that the abuse of dominance provisions may apply to joint conduct where: (i) several firms agree to engage in anti-competitive conduct; (ii) an agreement between firms is itself anti-competitive conduct as discussed above; or (iii) a firm correctly recognizes that if it engages in anti-competitive conduct its competitors will likely reciprocate.
List of anti-competitive acts
The amendments expanded the list of anti-competitive acts in section 78 of the Act to include "a selective or discriminatory response to an actual or potential competitor for the purpose of impeding or preventing the competitor's entry into, or expansion in, a market or eliminating the competitor from a market".
While the Draft Bulletin recognizes that this new example may clarify the scope of section 78, it notes that the list under section 78 has always been non-exhaustive and, in the Bureau's opinion, the abuse of dominance provisions previously applied to this type of conduct. As such, the Bureau is of the opinion that this amendment does not expand the scope of the abuse of dominance provisions.
Competitive effects factors
The amendments introduced a list of factors to be considered for the purposes determining whether a practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market. These factors include: (a) the effect of the practice on barriers to entry in the market, including network effects; (b) the effect of the practice on price or non-price competition, including quality, choice or consumer privacy; (c) the nature and extent of change and innovation in a relevant market; and (d) any other factor that is relevant to competition in the market that is or would be affected by the practice.
Notably, the Bureau (and the courts) already considered these factors as part of its analysis under the abuse of dominance provisions. In fact, many of these factors were included in previous guidance from the Bureau. As such, similar to the expanded list of anti-competitive acts discussed above, the Draft Bulletin confirms that these amendments do not change the Bureau's enforcement approach.
Specifically, with respect to consumer privacy, the Draft Bulletin also confirms that the Bureau does not view the introduction of "consumer privacy" in (b) to create a new, stand-alone goal or purpose for the Act (i.e. protection of privacy), but simply confirms that privacy is a relevant feature of product quality with respect to which firms may compete.
The amendments also increased the potential AMPs available for a contravention of the abuse of dominance provisions and introduced a private right of access pursuant to which private parties are now permitted to apply to the Competition Tribunal for leave to bring application under the abuse of dominance provisions (prior to this amendment, only the Commissioner of Competition could seek a remedy before the Tribunal for abuse of dominance).
The Draft Bulletin does not provide substantive updated guidance with respect to these amendments. With respect to seeking AMPs, the Draft Bulletin confirms that the Bureau will continue to consider the same principles previously considered. With respect to the new rights of private access, the Draft Bulletin notes that its existing guidance on private access under other provisions of the Act is applicable.
The Draft Bulleting is subject to public consultation, and feedback on the Draft Bulletin can be submitted to the Bureau any time prior to December 24, 2023. Feedback can be provided by mail or through an online feedback form.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.